Are You Paying Too Much in Texas Property Taxes?

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3 Things You Can Do to Reduce Your Texas Business Personal Property Taxes

Let’s face it, nobody likes paying taxes. This is especially true today with the country now officially in a recession. However, businesses must pay taxes on income, profits, and property they hold, and that is not changing any time soon.

Today, some businesses in America are filing for bankruptcy, others are downsizing in an effort to stay afloat, and many more are asking employees to take furloughs, pay cuts, or simply to work more hours to help their employer make ends meet. Everyone is being asked to do more with less.

What companies need during times like these are cost-saving ideas that include ways to free up capital. If you think your company might be losing out on potential tax savings, here are 3 things you can do to reduce your Texas business personal property (BPP) taxes.

#1. Make Sure You are Filing Your Property Taxes at Market Value to Keep More of Your Hard Earned Profits

The Texas Property Tax Code defines market value as what a willing buyer would pay for your inventory as a unit to carry on the business.

The first thing you can do to reduce your Texas business personal property (BPP) taxes and keep more of your company’s hard earned profits is to take the Texas Property Tax Code at it’s word. You can do this by making sure your fixed assets and inventory are appraised based on the code’s definition of market value. Our firm has been filing this way on behalf of our more than 600 clients for two decades now – the result being hundreds of millions saved.

In Texas, appraisal districts determine taxable values for fixed assets according to depreciation schedules (usually mass appraisal) of their own devising, which are made up of a combination of straight-line depreciation for age, based on their assumption of “useful” lives, and ratcheted up by index factors for a high-level reproduction cost new. They generally residual the values at 10% to 30% of indexed cost, until you physically get rid of the asset. So, they never go to zero, unlike book value as GAAP allows.

For inventory, the Texas Property Tax Code defines market value as what a willing buyer would pay for your inventory as a unit to carry on the business. This is a one-buyer-take-all concept. A concept you can put into practice with the right data behind your rendition filing and an understanding of how to navigate the filing process in the state.

If you’re holding property in multiple locations in the state, it is important to value your fixed assets and inventories according to the tax code’s definition of market value on a location by location basis.

#2. Determine Fair Market Value of Your Property – The Cost of Your Fixed Assets and Inventory Does Not Equal The Value of Your Fixed Assets and Inventory

Most firms in the U.S. are filing BPP tax renditions in Texas that favors the Assessor’s mass appraisal and not their client’s rights to fair market value.

As we noted in point #1, the value of the fixed assets you hold in Texas should be measured against what a willing buyer would pay to purchase your property as is and your inventory as one unit with the purpose of carrying on the business. Not according to their cost and then against a mass depreciation schedule.

Unfortunately, most firms in The U.S. are filing BPP tax renditions in Texas that favors the Assessor’s mass appraisal and not their client’s rights to fair market value. They often do this because they see the rendition filing process as a pass-through function of their overall tax service they provide their clientele. While this approach works in some states, it is highly detrimental to their client’s bottom line for property held in Texas – a state with one of the most aggressive tax protocols in the nation. To make matters worse, if that client has a lot of their property in Texas it could be costing that client thousands to millions of dollars in excess taxes.

Determining the fair market value of your property in Texas can be a challenge if you do not have access to, or the ability to afford, third-party appraisal data. Third-party appraisal data is necessary to support your opinion of market value when filing your rendition in this manner. Without it, you are at the mercy of the county assessor’s office and their process of mass appraisal.

Partnering with a consulting firm who can leverage third party data, who understands how to navigate the Texas filing process using fair market value, and who has intimate knowledge of the 254 counties throughout the state and how to win protests and appeals in those counties, will position you to maximize your savings.

#3. Align Your Company with a Consulting Firm That is Rooted in Texas and is Focused on Reducing Your Property Tax Values as Their Core Business Function

Once you know your options, ask the firm you work with, or a firm you are considering, if they file property tax renditions at market value using independent appraisers or if they file at cost and year acquired subjecting you to the county assessors’ tables. If the latter, you should be concerned. This could be costing you handsomely.

Financial divisions today have choices when it comes to hiring outside assistance with their property tax needs. Aligning your company with a consultant who knows the Texas Tax Code and who does not simply pass-through a rendition relying on mass appraisal is critical.

If you are unsure where to begin to start minimizing your Texas property tax burden, start with the tax code itself. The definitions for determining market value are clearly laid out. The next step is acting on what you have learned.

Once you know your options, ask the firm you work with, or a firm you are considering, if they file property tax renditions at market value using independent appraisers or if they file at cost and year acquired subjecting you to the county assessors’ tables. If the latter, you should be concerned. This could be costing you handsomely.

If you currently use a national carrier, consider carving out Texas from your agreement and use a firm more focused on the nuances of the tax code in this state. Especially if your holdings in the state exceed $5 million in business personal property – amounts that often require specialized in-depth review to identify tax savings.

Minimizing Property Taxes Can Improve The Financial Health of Your Business

Today’s economy demands more from all of us. It demands that we work smarter and work to find ways to improve our company’s bottom line. Filing independent market value in Texas is the best way to do just that. Companies using this approach see tax savings upward of 30% annually.

With the forecast for recession extending into the next few years, these are savings that could quite literally save your business, or at a minimum, stem the tide of excessive layoffs, revenue losses, and declines in profit.

“How we’ve always done it” is not going to cut it any longer. Companies that are not looking for ways to reduce excess expenses like this are companies that will not likely survive the next few years. Continuing to file your property taxes in Texas based on a cost-depreciated method aligned with the assessors’ tables should be something you change immediately. It is a simple thing but using our services could be the difference between keeping the doors open or closing your business altogether.

If you are considering how to get started, reach out to us today, and we can coordinate a time to provide you more information on our process and how we are helping companies like yours save millions every year.

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